An Example of a Sunk Cost Would Be

question 9

Multiple Choice

An example of a sunk cost would be:

• A) the price of a lift ticket you bought and used to ski the whole day.
• B) the price of a lift ticket you bought and used for 1 run before you fell and broke your ankle.
• C) the nonrefundable deposit you put on your vacation rental.
• D) All of these are examples of sunk costs.

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Definitions:

Amortized

The gradual reduction of a debt over a period of time by making regular payments of interest and principal sufficient to repay the loan by maturity.

Straight-Line Method

Straight-Line Method is a form of calculating depreciation or amortization by evenly spreading the cost of an asset over its useful life.

Amortization of Bonds

The gradual reduction of the discount on bonds payable or the premium on bonds receivable over the life of the bonds.

Discount Amortization

The process of gradually writing off the discount on bonds payable over the life of the bonds.